Why do options look right or lose money


There are many factors that affect the option price, the most important is the price of the subject matter, the volatility of the subject matter and the maturity date. Many novices only focus on the price of the subject matter, so they will have the right direction judgment and still lose money.

To analyze the option price, we can't just look at the price trend of the subject matter. Although the price of the subject matter is the most fundamental factor, when the price fluctuation of the subject matter is insufficient, other factors will have an obvious impact on the price of the 50ETF option. Among them, the final two points are the time value and the volatility. If we judge the direction of 50ETF correctly and make long options, the price of options will also decline due to the decline of time value and volatility 。

Time value and volatility should be fully considered when trading options. Sometimes we need to avoid them and sometimes we need to make use of them. Next, let's have a look at it with Xiaobian

1. Reasonable choice of execution price of contract

The time value of different value types is different. The time value of options is the largest near the average option, while the real option and the imaginary option are smaller. In terms of the proportion of time value to option price, the real option is smaller, the imaginary option is larger, and the higher the virtual value, the greater the proportion of options. Therefore, we should try our best to avoid the contract with low virtual value when we buy options.

2. Use related strategies

We can reduce the impact of time value through a series of strategies. For example, when we buy the call contract, we sell the same number of call options with the same month but higher exercise price. Because the put option is a net time value, the time value consumed by the two offsets will be reduced.

We can also carry out volatility arbitrage through cross strategy. When the volatility is low, the call option and put option with the same exercise price, month and quantity are purchased at the same time. When the volatility increases, the difference between the call option and the put option can be earned; When the volatility is high, we can sell call and put options with the same exercise price, month and quantity, and enjoy the difference between them when the volatility decreases.

    Was this article helpful?

    0 out of 0 found this helpful